Agora Financial’s Rude Awakening

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Dubai, UAE

· Dow rallies 300 points ahead of Obamamania,
· Can the President Elect orchestrate a miraculous market turnaround?
· Part one of your “chicken long” ideas and plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

The people of the United States of America prayed for a political messiah. Now that he has stepped forth, we are left to wonder, what next?

Politics is not really our beat here at the Rude Awakening, so we won’t be offering up any four-legged sacrifices for the promise of financial salvation. In the harsh light of economic reality, miracles are hard to come by, even for those claiming to posses the kind of optimistic foresight that defies rational explanation.

A cursory glance toward the economic horizon reveals some perilous obstacles ahead. As we walk through the valley of 5-year market lows, the shadow of the death of consumer spending looms particularly large. American consumers, upon the backs of whom almost two-thirds of the world’s largest economy rests, cut spending by an annualized 3.1% for the third quarter. For perspective, that marks the first quarterly decline since 1991, as well as the largest quarterly decline in 28 years, according to the U.S. Commerce Department.

Meanwhile, prices of goods and services purchased by US residents jumped 4.8%. That’s on top of a 4.2% increase in the second quarter. Even excluding food and energy, prices were still up by 3.1% in Q3.

As the consumer-driven economy grips the emergency brake and higher prices put the squeeze on employers, jobless rates continue to skyrocket. The Department of Labor is expected to announce the loss of 200,000 jobs for the month of October when it meets on Friday. That would drive unemployment to 6.3%, up 0.2% from September.

Shrugging off all these annoying statistics, however, the market continue to mount a herculean rally. After posting its worst month since 1987, the Dow surged an impressive 300 points yesterday in anticipation of Obama’s victory, topping off double-digit gains for indexes across the board last week.

Could we be witnessing a miracle in the making here? Is it possible that a new tablet of financial commandments might render the age-old saws of saving and producing nothing more than outdated or even, dare we say, profane?

We wouldn’t dare offend any divine and future superintendent of the financial universe by asserting otherwise…but we reserve the right to remain unconvinced.

In the absence of proof that what goes up need not come down, we will continue to seek our financial guidance from within the “boring” confines of reality. And so, we turn to the inimitable Rude Readership for the results of our latest Group Research Project.

A couple of weeks ago, we asked readers to submit their favorite “chicken longs.” Put simply, we wanted to know what stocks readers would like to have in their portfolio should the heavens open up and curse the earth with a great financial flood. Such stocks might derive their buoyancy by paying a large dividend, enjoying a competitive position in a relatively “high ground” sector or through some other means of protection.

We have no clue as to whether the President Elect will perpetuate the current state of fiscal delusion or merely usher in a winter of slightly milder discontent…but it is probably best to be prepared for either scenario. In the column that follows, your fellow readers offer their best chicken longs for your consideration. Please enjoy and, as always, fell free to forward any of your own ideas to the address below…

— When Fear = Profit: A Special Volatility Report —

The volatile month of October saw the VIX Index hit an all time high of 89.53. Put simply, the markets are bucking and kicking like we’ve never seen before.

With such unpredictability, it is difficult to know where to invest, if at all .

There is, however, one man who has been relishing the recent whipsawing market conditions.
Steve Sarnoff has been on an absolute tear lately. His last five picks have all more than doubled… and are sitting at cumulative highs of 1,222% .

Learn how to make fear in the markets work FOR you and check out Steve’s Options Hotline Service Right Here

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Chicken Longs
Edited by Eric Fry and Joel Bowman

Reader “Bradbarb69″ kicks off our newest Rude Awakening Group Research Project with the following cheerful suggestion:

“I like prison stocks. There will never be a shortage of lawbreakers at any level, and governments must maintain prisons for the public good. As crime rises (as it inevitably will) these stocks will be good holdings. I also like [the cemetery operator] Stonemore Partners L.P. (STON) for its high dividend and for the fact people will always die no matter what the economy does. Personal protection stocks are also on my list of “buy at the right price.” I’m thinking in particular of Smith & Wesson (SWHC) and Taser International (TASR). [Editor's Note: Although Bradbarb69 did not provide any specific names in the prison sector, a couple that come to mind are Geo Group (GEO) and Corrections Corp. of America (CXW).]”

Reader Tom Winstanley recommends Weir Group, a Scottish company that trades in the U.S. over-the-counter market under the symbol, WEIGF.

“This company makes boring old pumps,” Tom explains. “Energy and Water are two areas that simply will not wait upon the recovery of the world economy. Come hell or high water, governments know that if they cannot keep the lights on, provide as much fresh water as their people are used to having available and treat waste water to high standards, then they will be more trouble than they can handle. Pumps might be boring but try getting by without them – whatever the state of the economy!” [Editor's Note: Weir trades for less than eight times estimated earnings and yields 4%].

Reader Susan Vander Voet likes the Brazilian oil giant, Petroleo Brasileiro (PBR), also known as Petrobras. The stock was trading around $21 when Susan submitted her email to us. Today, the stock is around $30.

“I’ve been watching this company for about a year,” Susan writes, “and the reasons for my recommendation are:

1. Active and with interests in several Latin American countries (Brazil, Ecuador, Chile, Peru) in exploration, production, distribution and retail;
2. Huge offshore resources discovered in Santos Basin;
3. Active in several African countries (Angola, Tanzania);
4. Stock is trading well below the moving average, which has trended upward for 5 years;
5. As oil prices are projected to recover (in 2009), I see this stock at least doubling its current value ($21).”

Reader David Myrhre identifies Harvest energy Trust (HTE), a Canadian investment trust, as his “current fave.” The stock, which was trading below $8.00 when David submitted his email to us, is now north of $11. But even at the current quote, the stock is well below the $18 price tag it fetched in September. What’s more the indicated yield on the stocks is a whopping 27%.

“I’ve heard worries that the dividends will go down because oil prices have gone down,” David explains “But these oil producers sell on annual and multiyear contracts. Dividends didn’t go up when spot oil prices spiked and they won’t go down just because spot prices did.”

Elsewhere in the Canadian investment trust sector, reader Greg McLean highlights Peyto Energy Trust (PEYUF), a stock that yields about 14%. Greg also likes Hanfeng Evergreen, “HF” on the Toronto Stock Exchange. “Hanfeng is a small Canadian company that makes slow release rice fertilizer in China,” explains Mr. McLean. “Hanfeng has decent earnings and cash, little debt and is trading close to book. I feel confident betting China will continue to grow rice.”

Another high-yield energy stock is Atlas Pipeline (APL), which is a stock that reader Don Gish favors. “My favorite bear market stock is Atlas Pipeline (APL),” Gish writes. “The sudden drop of the energy market and other market sell-off factors have driven APL unrealistically down. [At the current quote, the stock yields about 20%]. I believe APL’s focus on natural gas pipelines with no exploration/development costs and long term contracts has created an excellent long term dividend with significant potential for future stock price upside. I love this position, so I have to resist my desire to buy more.”

Lastly, reader Scott Lovinghood writes: “I have a suggestion for a chicken long: Blackrock Municipal Income Closed End Fund (BFK). It is primarily invested in tax free municipal bonds. At current prices the yield is just a hair under 8% TAX FREE!! The fund covers many different states and markets. California is the largest concentration at only 11% of the fund. The majority are longer dated bonds, so unless municipals are totally wiped out, the monthly pay outs should continue. The shares were hammered recently due to the credit freeze. The stock’s NAV is $10.15. But the stock is only $9.20…Not a bad deal.”

And so concludes Part I of our newest Rude Awakening Group Research project.

—- Chris Mayer’s Special Situations Report —-

We Asked Our Resident Value Investing Expert For His Safest (and most profitable) Crisis Investing Idea. A Few Days Later, We Received The Following Report.

Introducing…

Closed to New Investors for the Last 6 Years — Now Open Again… The “Chaffee Royalty Program” That Turned Every $1 Into $50

In 2002, the same royalty “paycheckprogram” that paid out $50 for every $1 invested… decided to shut the door to new “members.”

In 2008, that door is open again…and it just got easier than ever to”make money while you sleep”…

But there’s no telling when it could close again…So you’d better collect your own “Chaffee Royalties” right NOW! Full Report Continued Here

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[Rude Endnote: Even though the market continues to drive higher, the landscape is still rife with opportunity for the careful and patient investor. If you would like to contribute your best chicken long idea for consideration in tomorrow’s issue, please send your ideas to the address below.

Until next time…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com